US Tech Stocks Plunge As Trade War Worries Over Fangs Catch Up

Photo by QuoteInspector via Flickr

Yesterday, the biggest technology stocks, commonly known as the Fangs, dropped steeply as the concerns regarding a trade war weighed on the world indices.

Last Monday, the tech-heavy Nasdaq index dropped by 2.6 percent to place it on course for its lowest close since the end of the previous month.

Amazon and Facebook both lost well more than three percent, while Netflix dropped by more than six percent. Alphabet, the parent company of Google, and Apple also plunged heavily.

The equity indices across the globe had earlier decreased, with the Cac 40 of France losing nearly two percent while the Dax of Germany gave up 2.46 percent as the investors feared about further damaging the trade moves.

The tech stocks in the United States have generally been immune to concerns over protectionist trade tariffs, with no mention by either China, the European Union, or the United States, of levies or other barriers that may be imposed on them.

However, the investment director at trading platform AJ Bell, Russ Mould, said that the recent success of the Fang stocks – an acronym that represents the tech giants – in spite of market ructions may have made some shares more vulnerable to broader moves if the sentiment changes.

He stated that the Fangs may be “targets for some profit taking” once the investors plump for cash amid the fears of a greater setback of the market.

The tech stocks are approaching the similar levels that were affected by the Nasdaq during the dotcom bubble at the turn of the century. Mould said that it ended in a deep crash of over 78 percent.

Over the course of this year, a “Fangs+” index, which includes other large tech firms that are listed in the United States, has surpassed the gains of the bubble-era Nasdaq.

However, the Fangs still face some regulatory issues which could severely affect their business models. This comes after the scandal that exposed the data misuse by Cambridge Analytica, a political consultancy firm, some ongoing tax issues, and competition concerns..

Mould continued: “The danger for bulls is that these valuations leave little margin for error should something – anything – go wrong.”